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KBC admits to error in calculating tracker mortgage redress payments

Lender fined €18m in 2020 over strategy of moving borrowers off cheaper tracker loan option


File image. Photo: Leon Farrell

File image. Photo: Leon Farrell

Seana Cunningham, enforcement director at the Central Bank

Seana Cunningham, enforcement director at the Central Bank


File image. Photo: Leon Farrell

KBC Bank has admitted it made an error calculating the redress for hundreds of tracker customers that it has already compensated after being found to have mistreated them.

The departing lender was fined €18m in 2020 for devising a strategy to move borrowers off cheap loans, and had “persistently” resisted as regulators pushed it to admit its failings, the Central Bank found.

Borrowers lost 66 properties, including 11 family homes, as a result of the overcharging, the Central Bank said.

KBC Ireland initially admitted that only 93 of its customers were affected when the Central Bank began a probe into the scandal in late 2015.

The total number has increased to more than 3,700 “but only following the sustained challenge and intervention of the Central Bank”, the regulator said.

Now it has emerged that the bank has written to 692 of the tracker victims telling them it made a mistake in how it calculated the redress they got.

Overall amounts paid to these customers will not increase. But KBC is providing the customers with the option to take more of their redress as a direct payment instead of this money being applied to their mortgage balance.

In a letter sent to Evan O’Dwyer, a Mayo-based solicitor for one tracker victim, the bank apologised and admitted it made a mistake.

The letter from Dublin law firm Lavelle Partners, seen by the Irish Independent, stated: “Our client continues to adopt the position that the total redress amount provided by our client to your client is ­correct and appropriate.

“However, it has been identified that a larger amount of the redress should have been provided to your client as a direct payment rather than as a reduction of her mortgage balance. Our client sincerely apologises to your client for its error.”

The admission comes after a final audit of the tracker redress and compensation payments made by KBC.

It found that in a number of cases it overstated the capital balance of victims and now wants to give them the option of higher redress for overcharging them by imposing interest rates that were too high.

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This happened when it capitalised arrears, or added the arrears to the overall mortgage balance. This resulted in overpayments, because the tracker interest rate KBC applied was too high.

If the affected customers opt to take a higher level of redress, it will increase their overall mortgage balance. The bank is offering up to €500 to affected customers to seek independent financial or legal advice on what they should do.

Customers also have the option of using the bank’s internal appeals process.

In 2020 the Central Bank fined KBC €18.3m. KBC had to pay €153.5m in refunds and compensation to 3,741 customers who had been affected for more than a decade by being wrongfully denied cheap loans tracking the ECB rate.

Central Bank enforcement director Seána Cunningham said its probe “found KBC persistently refused to accept its failings despite having multiple opportunities to remedy the detriment that it was causing to its customers over an extended period”.

“KBC’s actions in this regard, including the failure to adequately comply with the Stop the Harm principles of the (tracker mortgage examination), were simply unconscionable,” Ms Cunningham said.

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